“The Bear Market Economics Phenomenon” is an observation of Political Economics. Wall Street Admits: ‘We Got Rich Off the Backs of Workers’ thus creating the Bear Market. The Bear Market is America's default war.
The ethic of Wall Street is the ethic of celebrity. It is fused into one bizarre, perverted belief system and it has banished the possibility of the country returning to a reality-based world or avoiding internal collapse. A society that cannot distinguish reality from illusion dies.

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Friday, April 15, 2011

Dissecting Laissez-Faire “Theory”

David Korten’s recent “Greed is Not a Virtue” suggests—as his subtitle implies—that “profit-centered market fundamentalism has become a national religion” in this country. He notes, however, that for “millennia humanity’s most celebrated spiritual leaders have taught that society works best and we all enjoy our greatest joy and fulfillment when we share, cooperate, and are honest in our dealings with one another.” And he could have added—but did not—that an abundance of research (experimental and other) done in recent years (by, e.g., Frans de Waal and Dacher Keltner) has provided scientific support for such teaching.

Despite the teachings of spiritual leaders over the centuries (and recent research in support of their teachings), during the “past few decades,” Korten observes, “market fundamentalism” has risen to the fore—and virtually become our “national religion.” Korten refers to “market fundamentalism” as a “faith,” thereby suggesting that it is based more on wishful thinking than evidence—and he is correct in making such a suggestion. But although Korten provides us with a number of examples of the “moral perversion” that has resulted from the reign of “market fundamentalist” thinking, he does not demonstrate that “market fundamentalism” is a “faith.” Given that I regard it as important to do so, I herein supplement Korten’s presentation by:

“Fleshing out” what he calls “market fundamentalism”—and what I call the laissez-faire model. (Note that I have put “theory” in quotation marks in my title above, to indicate that market fundamentalism should not be dignified with the label “theory,” “model” being the more appropriate label).

Then demonstrating that the laissez-faire model stands on a base of loose sand—a demonstration that is only possible because of the previous “fleshing out.”

The fact that laissez-faire thinking rests on an extremely weak foundation has not, of course, prevented it from rising to prominence. But exposing that weak foundation may help reduce its popularity. (A recent book by Clyde Prestowitz goes further on this matter that I do here, I should add.) That’s my hope, at any rate (I hesitate to say “faith”!).

Before launching into a discussion of what laissez-faire thinking involves ,and what its weaknesses are, I would like to make some background comments pertaining to societal systems.

Background Comments

I should perhaps begin by observing that a societal system is a complex “thing”: It consists of (a) tangible things such as people, buildings, consumer/producer goods, and roads; but also (b) institutions (marriage, economic, political, religious, etc.), (c) behavior patterns, (d) know­ledge/technology, and (e) beliefs/ideals/valuations. The latter (which are the essence of a worldview) “power” the system, while simultaneously being supported/fostered by the other components of the system; the “educational”1 institutions, of course, but the other institutions as well. Thus, on the one hand, the way of life (conceived broadly) provided by a societal system inculcates, in members of the society, a certain worldview; and individuals, in then acting on that worldview, tend to behave in a fashion that perpetuates the Existing Order. The fact that the Existing Order is “perpetuated” does not, of course, mean that it remains static; but the change that it “endures” tends not to change its basic character, except rather slowly.

What makes the various components of a system all part of the same system is that they work together, mutually support one another. Which is not to say, however, that a societal system is closely analogous to a machine in consisting just of compatible components that work together smoothly. Likely, any societal system is characterized by a certain “looseness,” the presence of certain (near) contradictions. But those contradictions usually do not prevent the societal system from functioning; indeed, they may serve to give the system adaptability.

The “looseness” of a societal system is manifest in its worldview component; for although a societal system has a dominant worldview, it also has various secondary worldviews. A given secondary one may be associated with a given subordinate group(s) in the society—so that, e.g., Thorstein Veblen associated a de facto mentality with workers and engineers, a de jure one with dominant groups in the society.2 Or a given secondary worldview may be associated with weekends, the dominant one associated with weekdays—so that, e.g., Veblen associated (in effect, at any rate) a “morals of Christianity” worldview with Sundays, a “morals of competition” one with the rest of the week.3 (Which doesn’t say much for the importance that Christianity plays in our society!—other than as a belief and ritual system.)

The dominant worldview itself may be somewhat “messy” in that it may contain various vestigial elements. Indeed, I like to think of our dominant worldview in our society today as being somewhat analogous to a tureen of soup—especially the soup in the famous “stone soup” story. I realize that “analogies are the camouflage of loose thinking,”4 but think it somewhat useful to think of the currently-prevailing worldview as an accretion of worldviews that have been added to the “soup” during different periods of time. Thus, I see an ancient “masculine”5 component, an “individualistic” component,6 a classical economic “theory” component (discussed in this paper), a more recent “scientific” addition,7 a Social Darwinism element, and a narcissistic addition.8 And perhaps a new ingredient has been added more recently, relating to the increased use of personal computers, laptops, ipods, the world wide web, etc.

Of these “ingredients,” I see the classical economic (i.e., laissez faire) “theory” and Social Darwinism ones as being particularly important.9 And I think it important to note that people see through the lens provided by the dominant worldview, and therefore are rarely able to see through that lens. By exposing herein the nature of laissez faire thinking, I hope to help people see through it—so that it will no longer “possess” them, and they will be then able to deal with it appropriately (i.e., discard it!).

To return to my comments on societal systems: The worldview of a society can be thought of as a series of premises/assumptions (the explanans), and the conclusion(s) (the explanandum or explananda) which logically follows (purportedly) from those premises/assumptions. Most of the premises/assumptions constituting a worldview state (purported) truths; some may, though, state—or imply—valuations. The conclusion(s) which is a part of a worldview describes a salient feature of the society, and supposedly is a valid conclusion—i.e., one that logically follows from the premises/assumptions. Given this, one can say that the premises/assumptions explain the conclusion—so that the worldview can be thought of as a “theory” of sorts. It is, however, more accurate (honest!) to admit that the premises/assumptions of a worldview rationalize/justify the Existing Order, rather than explain it in a scientific sense.

A society’s worldview not merely guides (directly, at least) behavior; it drives behavior. Paradoxically, however, the worldview of a society is rarely clearly visible: Given that it typically amounts to apologetics which (directly) serve the interests of the elite, the elite makes no effort to make the worldview explicit. Thus, a fog tends to develop, and reduce the visibility of the worldview. This fog is, of course, usually difficult to see through: Because one tends to see through the worldview, one finds it difficult to see through it. Indeed, although it is the worldview of a society that drives behavior, the claim may be advanced (with the tacit blessings of the ruling class) that something else does. For example, recently sociobiologists and their minions have been making the claim that behavior basically has a genetic basis. Although this claim is perhaps not being made by members of the elite, or even its lieutenants, those advancing it are serving the interests of the elite; for their efforts divert attention away from the prevailing societal worldview and its role in driving behavior.

The worldview of a society evolves over time—although the word “changes” might be more apt here, given that “evolves” suggests that a worldview improves, becomes somehow “better,” over time. Why does it change? Seemingly, a worldview changes in response to societal system change: As a societal system changes (in response to technological changes, etc.), this “drags” the worldview with it (with some lag); so that rather than the worldview causing societal system change, the reverse is true. A worldview, then, does play a causal role, but only at a certain (limited) “scale.”

As a society changes, the nature of the elite likewise changes (meaning that the elite does not change a society; rather, the society changes the elite); as a new elite emerges, it is helped along by the emergence of a new (or at least modified) worldview. This new worldview must be made (at least partially) explicit; and once it has become explicit, the emerging elite uses it to help it emerge to dominance. But once it has dominance, the elite is content to allow a fog to build around the worldview—so that its very invisibility helps give it force.

In discussing the laissez faire model, I begin (Section I) by presenting the initial—the “pure”—version of the model. In Section II, I then comment on the premises constituting the model (i.e., the explanans), as well as the explananda of the model (i.e., that which the model explains—purportedly, at least). In Section III, I introduce modifications into the model, to help make it explain more accurately. In Section IV, I comment on perhaps the most important concept associated with the model, that of meritocracy. And, finally, in an Appendix, I compare laissez faire thinking with utopia thinking—which enables me to further critique the former.

I. The Initial Version

Let me begin by asserting that the dominant portion of the prevailing worldview today is an updated version of one which had been developing prior to 1776, and was then given initial shape by Adam Smith [1723-1790]10 in his classic Wealth of Nations [1776].11 The updating which has occurred involved incorporating the Darwinian “theory” of natural selection into it—one implication being that the worldview got changed from one emphasizing stasis (as if change does not occur over time) to one emphasizing dynamism, “evolution” in particular. My focus here, however, is on laissez faire thinking proper rather than later additions to our worldview.

3. A society is a mere collection of individuals (i.e., an atomistic conception of society is assumed). Insofar as a society is “real,” it is something created by the individuals who comprise it (“social contract”); as such, it can have no influence on the individuals in it: “societal influence” is a fiction, an impossibility. However, there is one qualification regarding human superunits: Government is real; indeed, because of that fact, it can “interfere” in the realm of human activities—can, in fact, only interfere.

4. Individuals are perceived in uni-dimensional (i.e., reductionistic) terms—only as actors in the economy (i.e., producers and consumers of goods/services).

5. Economic activities (in terms of production and exchange) are conducted by household heads (males); “domestic” activities—not recognized as “economic” activities because they involve no remuneration—are engaged in by wives (females) and children. All members of a given household consume, of course. Indeed, the only significance of women is that they bear children and are consumers; and the only significance of children is that they are consumers.

6. Household heads are similar in innate abilities. But because each household head acquires certain skills as a specialist, household heads vary in skills. These skills result from practice, however, not genetic inheritance. (Wives, though, because they all perform the same basic set of domestic tasks—preparing food, doing laundry, cleaning, etc.—differ very little one from another.)

7. Household heads are similar in their willingness to work—i.e., there is no variation in degree of industriousness/laziness.

8. Household heads are similar in motivation. Each is “driven” by a desire to maintain survival (this requiring the acquisition and consumption of certain goods) and, beyond mere survival, to attain a certain level of (material) comfort—this level of comfort being the same for all household heads, and being attainable. Given that work is irksome (i.e., involves discomfort), each household head strives to minimize the number of work hours (e.g., weekly) required to attain the given “standard of living.”

9. Household heads are either self-employed, or sell their labor to another household head (firm); thus, the production units of the economy are not necessarily all one-household units. Given that buyer and seller of labor bargain on equal terms, no employee is exploited; in Marxian terms, no employee produces “surplus value” expropriated by the buyer of labor (“capitalist”).

10. The exchange process is “frictionless” in that no time/cost is involved. It’s as if all elements of the economy in question existed at a single point on the earth’s surface! (It’s amazing how theoreticians in most “social science” disciplines are able to assume away—tacitly, at any rate—the existence of geographical space, yet are able to recognize the fact of time!)

B. The Conclusions

What conclusions logically follow from these assumptions/premises? Once we add the assumption that a force analogous to gravity (but referred to as an “invisible hand” by Smith) is acting on household heads, along with the assumption that there is a “beneficent natural order” (established, and maintained, by God?), we arrive at the following conclusions (beyond the facts that the “market” ensures that the right goods are produced, in the right quantities,13 the number of specialists in any given production specialty being exactly what’s needed; do these “facts” obtain because a “beneficient natural order” exists?):

1. Any given household consumes the same array of goods that it would if it were producing just for its own needs (“prosuming,” to use Alvin Toffler’s term14 )—but expends less time doing so (a fruit of the “division of labor”15 ).

2. Given that specialists are able to produce not only quickly, but with skill, any given household is able to consume higher-quality goods than would be possible under a regime of prosuming (i.e., self-sufficient households).

3. Insofar as the economy contains some producing units which involve several household heads, the economy is able to make available some kinds of goods whose production would not be possible under a regime of prosuming.

4. All households spend the same amount of time working, and obtain the same array of goods.

5. A meritocracy exists in the sense that each household receives (in goods) what it deserves (i.e., receives in proportion to effort expended). In this case, however, there is no variation between households in income: Everyone merits the same income, and everyone receives the same income. Household heads differ in the industry with which they are associated; they do not, though, differ in social class. A classless society, thus, exists—the socialist ideal! (Except, perhaps, for the fact that women are basically a faceless blob in this model: All are domestics, interchangeable ones at that.)

II. Comments on the Initial Version

In commenting upon the laissez faire model, I begin with the premises/assumptions that constitute the model. And what I emphasize is the dependence of Smithian thinking (at the tacit level, at least) upon Newtonian physics—Isaac Newton [1642-1727] having publicized his cosmological ideas just a few decades earlier. I comment on each premise/assumption point by point, then do the same with the five (5) conclusions listed above. Before presenting these comments, however, I should point out that Adam Smith is often described as an advocate of self-interested behavior—and that it is often argued that the “good things” of a free market economy all result mainly from self-interested behavior. It is true that Smith, in his often-quoted “invisible hand” discussion gave some support to self-interested behavior. But that comment was by no means central to Smith’s thinking: The statement doesn’t appear until Book IV, chapter ii—and this is the only place where the “invisible hand” is referred to in Wealth of Nations.16 In addition, one must keep in mind that if Smith were writing his classic in 2011, he might not even make any reference to an “invisible hand”!

A. The Premises/Assumptions

1. The (tacit) assumption that only matter is real is a “reductionistic” assumption, true, but one in accordance with “scientific” thinking as it had developed since Francis Bacon [1561-1626]. Note that the assumption that only matter is real reflects the influence of Newtonian physics.17

2. The assumption, regarding people, that only individuals are real, again reflects a decisive Newtonian influence. Note that what we have here, though, is a different sort of reductionism than with the first assumption.

3. What is assumed regarding society (that it is a fiction, real only insofar as a social contract makes it so) is inaccurate. Historically, it appears that societies originated before individuals (in the sense of self-conscious individuals), rather than the reverse. So that what the worldview assumes here is utterly lacking in realism. In addition, it is, in fact, rational to believe that individuals are influenced by the superunits of which they are a part; indeed, the discipline of Sociology is built on the assumption that individuals create superunits, and that those superunits then create (or at least strongly influence) individuals. Finally, it is absurd to assume that government can only “interfere.”18 But note that this assumption reflects the influence of Newtonian thinking—and is one that was to the interests of the emerging elite.

4. The treatment of individuals as just actors in the economy is an expression of the reductionism derived from Newtonian physics: Only individuals are real, but the only real thing about them is their economic activities. The fact of the matter, of course, is that individuals are much more interesting—and complex—than this model makes them out to be!

5. The assumption that economic activities are carried on by household heads involves a grudging recognition that the household exists as a human superunit. Tacitly, the household is seen as a unit of procreation, child care, and consumption (except that women and children are treated as if they didn’t really exist!); but given what is assumed regarding motivation (see point 8 below), it is not clear why households would form, and why procreation would occur! Although the existence of households is recognized (at least tacitly), households are held to be not “real” in the sense of being capable of affecting their members—which means that the worldview denies the possibility of “contextual” variables. Put another way, the model is “psychologistic” in holding that the behavior of an individual is a function of, and only of, certain internal (and internalized) characteristics (in conjunction with a force analogous to gravity). Again, the model shows the influence of Newtonian physics.

6. The assumption that household heads are similar in (innate) ability means that individuals are perceived as analogous to chunks of granite; thus, we have here another manifestation of the reductionism of the model—and Newtonian influence. The kinds of abilities that had relevance (for production) when this model was being created may not have had a strong genetic component; thus, the assumption may have had a degree of realism then. Seemingly, this assumption of equality in ability was a benign one; one can argue, however, that it was advantageous to the emerging elite in that it excused them from paying heed to the situations of the poor: It enabled them to ignore the plight of the poor in good conscience.

7. The assumption that household heads are similar in willingness to work: See the comment under point (6) above.

8. The assumption regarding motivation of household heads is obviously Newtonian. Note that individuals are not assumed to pursue “happiness,” and it is not clear why they strive to maximize their leisure time—because it is not at all clear what they do during “off” time! I would like to think, however, that the model assumes that although material goods contribute to well-being, their contribution is limited; that once one obtains certain goods/services (for sustenance/comfort), one’s well-being comes from other sources—such as interacting with others (having similar values), communing with nature, etc. (i.e., realizing their “design specifications”). But this is perhaps wishful thinking on my part!

9. The assumed equality of buyers and sellers of labor is another manifestation of reductionism and Newtonianism—and is an assumption utterly lacking in realism. Again, we have an assumption that worked to the advantage of the emerging elite.

10. The assumption that the exchange process is “frictionless” suggests, tacitly, that all households reside at a single point in geographic space! It should perhaps be recognized that the world’s first explicitly geographical model was not created until the early 1800s—by German Johann Heinrich von Thünen. If Adam Smith’s thinking lacked a geographic dimension, Smith can be excused—for he died in 1790. Theorists since Smith, however, cannot be excused for “theorizing” about a fictional—indeed impossible—dimensionless world.

B. The Conclusions

As to the conclusions (purportedly) following from the premises/assumptions of the model, the following comments can be made:

1. The conclusion that a household would consume the same array of goods/services as under a regime of prosuming, but work fewer hours, is a valid (i.e., logical) conclusion from the premises; but, of course, the latter sort of regime is purely hypothetical. An approximation of such a regime may have existed in certain places at certain times (e.g., homesteaders settling west of the Mississippi River after the Civil War). But such a regime likely never has existed in its pure form. Nevertheless, the concept of a regime of prosumers is useful as a benchmark with which a regime of producer-traders can be compared. Certainly it is easy to imagine that the people in the latter regime would be producing/consuming everything that the people in the former regime would be producing/consuming—plus a little more.

2. The conclusion that the residents of a producer-trader regime would be able to produce higher-quality goods than those of a prosumer regime is reasonable, for the former sort of regime permits the honing of skills. If jobs become too specialized, however, those doing them may find that they (the jobs) lack challenge—so that productivity and quality suffer. Paradoxically, however, managers rarely seem to have the wisdom to realize this fact, and “dumb down” jobs even though this may result in lowered productivity/quality.

3. The conclusion that more kinds of goods would be available with a regime of producer-traders than one of prosumers is a logical one, but only if one assumes the formation of large organizations. Note that such organizations need not be hierarchical in structure, with a clear separation of “capitalist” and “worker”—but in real-world terms usually are.

4. The conclusion that all households would spend the same amount of time working, and would obtain the same array of goods/services follows logically from the premises/assumptions stated; but such a conclusion would not be expected to hold in the real world.

5. The conclusion that a meritocracy would result—and that this meritocracy would be a classless society—follows logically from the premises/assumptions. I would add that in “predicting” a classless society the initial version of classical economic “theory” may predict fairly well the social situation as it existed in England prior to the Industrial Revolution. At any rate, Thorstein Veblen stated early in this century: “[The development of a handicraft-petty trade economy in England prior to the Industrial Revolution can be thought of] as a qualified or mitigated (sophisticated) return to the spirit of savagery, or at least as a spiritual reversion looking in that direction, though by no means abruptly reaching the savage plane.”19 (One must keep in mind here that by “savagery” Veblen meant what today we would term a gatherer-hunter—or forager—mode of existence. In his 1910 “Christian Morals and the Competitive System” Veblen had referred to “the promptings of hereditary savage human nature which make for fellowship and Christian charity.”20 Veblen’s positive assessment of “savagery”—and the life in accord with human nature therewith associated—has been confirmed many times over by subsequent anthropological research.)

III. Modifications

The conclusions of the Initial Version “fit the facts” of the time fairly well, but were glaringly erroneous in predicting a classless society: The England-Scotland of Smith’s time was decidedly not classless. And, in what was to become the United States there was (as, e.g. Robert A. Nisbet has pointed out21 ) “a distinct feudal character” to colonial society. How, then, can we “fix” the model so that it will yield variations in household income (if not social class—a concept that involves more than just income)? Let us first “complexify” the model by changing premise (7). Rather than assuming equality in industriousness, let us assume variability from one household head to another. What logically follows now?

Operationally, what this change means is that household heads vary in the number of hours devoted to “work” (each week, month, etc.). Household heads therefore vary in the amount they produce (expressed in monetary terms—given that a common unit of measurement is required to enable inter-personal comparison across industry groups). Because of this, they vary in what they can acquire (note that acquisition is assumed not to occur via theft!); and given the assumptions that a household head will acquire all that (a) he is able to acquire, and that the household will then (b) consume all that is acquired, there will be variation between households in “standard of living.”

Note that this conclusion impacts on premise (8)—indicating that the assumptions of the model are not necessarily independent one of another. What we can postulate here is that although initially all household heads may desire for their households a standard of living common to all, once households begin acquiring different quantities of goods (for whatever reasons) this may affect their motivational structure. That is, if a household head is able to acquire more than his “target” amount, he may in fact go ahead and acquire an “excess”—and then set his “target” at a higher level of acquisition.22

Although variation in industriousness can explain variation in income/standard of living, not all may agree that such variation does in fact explain variation in income/standard of living (during, e.g., Smith’s time). Rather than using industriousness as an explanatory variable, some may argue that, e.g., variation in motivation is the key factor. That household heads vary in their goals, and therefore in how much they wish to acquire; which factor affects how hard they work, which factor, in turn, determines how much they acquire—and how much members of the household consume. In a sense, Veblen’s “industrial” and “pecuniary” categories23 (with accompanying mindsets) recognize this possibility. For I would associate more (in terms of hours) work with “industrial” activity than with “pecuniary” activity; but—paradoxically—more income is associated with the latter sort of activity than with the former.

Even after modifying the Initial Version by “relaxing” its assumptions concerning industriousness and/or motivation, the model may be regarded as still providing an unconvincing explanation of household income variation. What is likely to be the next step in “complexifying” the model—thereby bringing it closer to the ground (i.e., reality)—is to modify premise (6). Rather than assuming equality in innate ability, one may assume inequality—and in terms of various “dimensions.” For example, one may assume variation in business acumen, and argue that household income is positively correlated (and strongly so) with degree of business acumen.

If business acumen is a type of mental ability (rather than skill—perhaps it is both) which can be plausibly postulated as a factor explaining “success,” so can other mental abilities: managerial, leadership, organizational—and cognitive (to list only some possibilities). The latter mental ability is more commonly referred to as intelligence; Richard J. Herrnstein and Charles Murray often used it in place of “intelligence” several years ago in The Bell Curve.24 Given that many (but certainly not all) jobs in the current U. S. economy involve “brain work” rather than skill (mechanical, artistic, musical, woodworking, etc.) or physical labor per se, it is certainly plausible to argue that “success” in contemporary America is a function of intelligence/cognitive ability. To argue, that is, that our society is not only a meritocracy today, but one based on intelligence. But is this the case? And is a meritocratic society desirable anyway? Let us address these questions in the next section.

IV. Meritocracy

There are two questions to address here: (a) Is our society a meritocracy? (b) Is a meritocracy a desirable objective?

A. Does a Meritocracy Exist?

Let us assume that a sample is selected of Americans who work for pay, and assume that for each individual in the sample annual income is determined along with “intelligence.” Assume further that “intelligence” has been measured on a continuous scale—on, indeed, a ratio scale. (Note that no existing IQ test, so far as I know, measures “intelligence” on a true ratio scale.) Assume, finally, that the simple correlation (Pearson’s r) is determined between these two variables, and that the correlation coefficient is found to be +0.95. That is, a positive—and very strong—relationship is found between the two variables.

Ostensibly, we have found the explanation of “success” in the United States. One could, of course, question whether the instrument used for measuring “intelligence” really measures what it purports to. But even if one does not question the accuracy of the test involved, one could still question whether one’s research had established that the United States is a meritocracy based on cognitive ability. Those who would make such a claim (tacitly) assume that the magnitude of one’s reward (income) is a function of the magnitude of one’s societal contribution; and that that magnitude, in turn, is a function of one’s cognitive ability/intelligence. But note that the hypothetical research referred to above involved no mention of the variable “societal contribution.”

I asserted earlier that the Initial Version “predicted” a meritocracy. I can now add that in that earlier discussion I implicitly thought of “hours worked” as a measure of societal contribution (for it was, I assumed tacitly, directly correlated with amount of production/output). And given that I tacitly assumed that income would be a function of hours worked, income would be a function of societal contribution (operationalized as hours worked).

If we turn now to our hypothetical situation within which an individual’s income is assumed to be a function of one’s “intelligence” (and not merely correlated with intelligence), can we also assert that a meritocracy exists in this situation? Can we think of income as being a function of societal contribution, and societal contribution, in turn, as being a function of intelligence? It is, true, commonly assumed (at least implicitly) that the income one receives is a measure of one’s societal contribution; at any rate, those who receive large incomes usually seem to believe that they are paid well because they contribute much. There is, however, good reason to doubt that income is a good measure of societal contribution. (Indeed, Veblen regarded high-income people as parasites/predators!—but one must admit that operationalizing the variable “societal contribution” in a meaningful way would be a daunting task.) This is an empirical question that has yet to be resolved. In the meantime, we must conclude that there is no good reason for believing that a society within which income is positively (and strongly) correlated with some measure of intelligence is thereby a meritocracy.

B. Is a Meritocracy “Good”?

In the case of value judgments per se it may not be possible to obtain objectivity, i.e., inter-subjective reliability (agreement between people as to what is “good,” what is not). It is, however, possible to cite reasons in support of one’s value judgments—and advisable so to do if one wishes to “convert” others to one’s way of thinking. Thus, I will do so here. The first point I would make is that our Judaeo-Christian heritage (at least in terms of the ideals associated with that tradition25 ) teaches us to be oriented to our duties, rather than our deserts, whereas the thrust of meritocratic thinking is on the latter. So that meritocratic thinking is intrinsically unChristian. But apart from this, additional comments can also be directed against meritocratic “philosophy.”

Let me first here point out that (what might be termed our Basic Societal (i.e., BS!) model—especially in its Initial Version—is heavily dependent on Newtonian physics. An implication of this fact (and one not commonly recognized) is that the conclusions of BS model are thereby made to appear “natural” and—as such—necessary. What this means is that a valuation in favor of meritocracy seems to be precluded: For if society is organized in accordance with certain universal “laws of nature,” it can’t be changed—so that it is, therefore, pointless to declare it to be either good or bad. Indeed, attempts to change it should not be attempted; for any such attempts represent “interference” (whether initiated by governmental officials or others). And some might even go so far as to assert that the “laws of nature” involved here were established—and are ordained—by God; so that to attempt to change the society is to rebel against God!

We need to be aware of these points because they help us understand why so many are resistant to rejecting meritocracy as a goal, rooted as the concept is in an evolved version of our BS model. Thus, even if we reject meritocracy as a goal on religious grounds, we should not be surprised to encounter others who accept meritocracy as a goal (along, perhaps, with “survival of the fittest”)—also on religious grounds.

A meritocracy is conceived as a society within which household heads receive in proportion to contribution (or at least “merit” in some sense); and is implicitly a society within which household heads use the income they receive to purchase goods for members of the household—and only them. That is, household heads are assumed to give nothing to individuals outside the household—for that would diminish the well-being of the members of one’s household. Indeed, the relevant model behind meritocracy gives the household head a rationale for not giving to others: “Others are receiving in accordance with what they deserve, just as I am; if others are poorer than I am, why should I give to them, given that they are receiving what they deserve? Indeed, if I help the poor, am I not helping the ‘unfit’ (to bring a Social Darwinian concept into the argument), and thereby contributing to the biological deterioration of the species? Also, given that my well-being—and that of other members of my household—will be reduced if I give to others, it is unreasonable to expect me to do so.” (As an aside, it should be obvious that a believer in meritocracy will never be heard to sing, “He’s not heavy, he’s my brother”!)

One can, of course, object to this rationale on religious grounds (just as one can object to various of the premises of BS model on the grounds of a lack of realism, or that they involve making demeaning assumptions about humans—e.g., treating humans as if they were merely economic creatures). That is, one can argue that from different “angles” meritocracy model appears unChristian, or otherwise unworthy of acceptance as a goal.

It seems to me, however, that the basic flaw of the BS model which underlies the valuation that meritocracy is “good” is that it is highly unrealistic in what it assumes about humans as biological creatures. I would contend that the human, qua human, has certain “design specifications” which s/he shares with all other humans (and that we can infer these specifications by, e.g., studying humans in contemporary gatherer-hunter societies). (Note, by the way, that I am not denying here that each person has unique needs.) I would contend that among these design specifications is a need not only to interact with others, but a need to do for others. Healthy Pleasures, by Robert Ornstein and David Sobel,26 is merely one work providing evidence in support of this assertion (the recent research of, e.g., de Waal and Keltner—referred to earlier—providing additional, and even better, support). Thus, whereas the model underlying meritocracy thinking seems to assert that humans derive happiness from—and only from—the consumption of material goods, the truth of the matter is rather different. Indeed, people are foolish to allow themselves to become “possessed” by this assumption, for their well-being is not served by it. (But why, then, do so many of our fellows allow themselves to be so possessed?!)

Not only is it the case that individuals, qua individuals, are not served well by this component of BS model; neither is our society—indeed, our species. For meritocratic thinking—insofar as it is rooted in biological assumptions—utterly “misses the boat” concerning the relevance of human biology (something Veblen seemingly recognized, without, however, applying his brilliant and iconoclastic mind to the subject). For since the “Fall” from a gatherer-hunter existence into a “civilized” one based (initially) on agriculture, human biology has changed but little, whereas ways of life have changed drastically. Whereas prior to the Agricultural Revolution there was a rather good “fit” between human biology and the gatherer-hunter way of life, the ways of life which have developed since then (largely in response to technological developments—especially recently) have become ever more removed from a “natural” way of life. We all, of course, have some “built-in” capacity to adjust, from a neurophysiological standpoint, to our current way of life. But our “plasticity” is not infinite—and adjustment is not necessarily a wise course to take (from a long-run standpoint).

Indeed, I would go so far as to assert that virtually all of our current societal problems have their basis in the fact that our current way of life is an “unnatural” one; and that The Discrepancy (between the way of life we have, and that which would be in accord with our “design specifications”) is also the basic reason why humans (led by us Americans) are pouring greenhouse gases into the atmosphere (and otherwise assaulting Gaia)—thereby putting the human species itself in jeopardy.

The valuation that meritocracy is a proper goal should, therefore, be rejected not only because it fails to serve people well as individuals, but because it endangers our species. A reorientation of our thinking is needed, but I am not among those (remember Charles A. Reich’s The Greening of America of several years ago?27 ) who insist that what is primarily needed, at present, is the widespread adoption of a new “worldview.” Rather, I believe that worldview change is needed in conjunction with institutional change.

Appendix

A fact that I find of interest is that laissez-faire thinking has something in common with utopian28 thinking: Both involve the hypothetical, but in different ways.

In the case of laissez-faire thinking, the assumptions that constitute the “theory” are just that, assumptions (i.e., hypothetically true statements), rather than laws: The assumptions claim, however, to be statements of empirical fact—but are not. The assumptions constituting the model “predict” an outcome and, curiously, that outcome is taken not as a prediction(s) of what might be, were the assumptions involved true, but, rather, is given a normative interpretation.

I say “curious” here for two reasons. First, although what we have here is actually a “predictive model” (analogous to the one that Johann von Thünen [1783-1850]29 published several decades after Adam Smith’s The Wealth of Nations was published [1776]). Second, its “prediction(s)”—treated, wrongly, as an explanation—is given a normative interpretation, there being no basis for giving it such an interpretation. Put another way, we are presented with no explicit rationale for viewing the model’s prediction(s) as being of a normative nature. Evidently, the (unstated) rationale for treating the model’s prediction(s) as normative are the tacit (but baseless) assumptions that (a) the assumptions of the model are laws of nature, (b) laws of nature are not only “true” but “good,” and (c) given that the model’s prediction(s) logically follow from its assumptions, that prediction(s) is also both “true” and “good.”

These facts regarding laissez-faire thinking make one suspect that it is of an ideological nature. That is, such thinking suggests that those who interpret the model in the above manner are either (a) individuals who benefit from such an interpretation, or (b) individuals who work for an organization that may benefit. Another possibility is that (c) they attribute (if but unconsciously) “intellectual elegance” to the model, and become so enamored of the model for that reason that they are simply unable to perceive the model in its true light.

That’s enough commentary on laissez-faire thinking and the role of the hypothetical in it. Let us next consider the case of utopian thinking.

The key feature of utopian writing is that it involves descriptions of the Good Society—which descriptions, of course, are of hypothetical situations. A utopian writer makes no claim that the situation being described exists somewhere;30 indeed, the claim has no factual basis, and the creator of the utopia in question, rather, is making a valuative judgment—asserting (if but tacitly) that the utopian situation in question is a desirable one, and because of that “fact” should be implemented by some given society. Why is it “desirable”? Usually, it would seem, the utopian writer takes for granted that because certain values are “held up” in the society (i.e., honored in the breach, rather than in practice!), readers will perceive that what makes the ideal situation “ideal” is that it conforms with the society’s (claimed) value system. Put another way, the writer feels no need to “explain himself” (i.e., provide a rationale) for s/he believes that his/her Good Society is “obviously” good—which fact I regard as a major deficiency of the utopian literature.

I put “educational” in quotation marks because such institutions usually provide more in the way of training than education, and tend to be purveyors of ideology supportive of the Existing Order. [↩]

Veblen did not see these subsocieties as equals which co-existed peacefully. Rather, he saw the former as dominating the latter, the former having a parasitic—even predatory—relationship with the latter. See his The Theory of Business Enterprise. New York: Charles Scribner’s Sons, 1904. [↩]

“Christian Morals and the Competitive System,” reprinted in Essays in Our Changing Order, edited by Leon Ardzrooni. New York: The Viking Press, 1934, p. 200-18. First published, in 1910, in The International Journal of Ethics. [↩]

Alfred Cobban, In Search of Humanity: The Role of the Enlightenment in Modern History. New York: George Braziller, 1960, p. 240. [↩]

Various other components might also be mentioned. For example, there are “moralistic,” and “traditionalist” “political cultures” of Daniel J. Elazar; and the “constrained” and “unconstrained” “visions” of Thomas Sowell. Daniel J. Elazar, American Federalism: A View From the States. New York: Harper & Row, Publishers, 1984 (third edition), p. 114-42; Thomas Sowell, A Conflict of Visions. New York: William Morrow and Company, Inc., 1987. [↩]

Smith’s time has been referred to by Karl Polanyi as The Great Transformation. New York: Farrar & Rinehart, Inc., 1944. [↩]

For some historical background see Albert O. Hirschman, The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph. Princeton, NJ: Princeton University Press, 1977. [↩]

Economists might not want to admit it, but what seems to have prompted the development of supply-demand analysis was the embarrassing fact that Karl Marx was in the “classic” tradition of using the labor theory of value. Supply-demand analysis permitted economists to disassociate themselves from Marx, and regain a claim to be in the “classic” tradition while removing Marx from it. See Benjamin Ward, What’s Wrong With Economics? New York: Basic Books, Inc., Publishers, 1972, p. 16 and 58. [↩]

See Toffler’s The Third Wave. New York: William Morrow and Company, Inc., 1980, Chapter 20 (“The Rise of the Prosumer”), p. 251-73. [↩]

Adam Smith did not, interestingly enough, believe that machinery would improve productivity of labor much; rather, he emphasized the importance of a division of labor. [↩]

As Steven Rose has pointed out, Newton’s ideas themselves were not that original. He points out that in 1931 Nikolai Bukharin of the Soviet Union delivered a paper in London in which he argued that “far from being a work of pure scientific scholarship isolated from the social conditions of the time, Newton’s experiments, theories and the framework in which they were set–their paradigms therefore, in [Thomas S.] Kuhnian language—had been shaped by the new economic demands of England’s rising merchant class.” Lifelines: Biology Beyond Determinism. Oxford, UK: Oxford University Press, 1998, p. 51. One might argue, indeed, that what Newton was for the rising merchant class, Darwin was later for the rising industrialist class. [↩]

E. F. Schumacher (A Guide for the Perplexed. New York: Harper & Row, Publishers, 1977) has, rather, identified four “Levels of Being” (the title of Chapter 2, p. 15-25): mineral, plant, animal, and man [i.e., humans]. I might add that the narrowness of Western vision (in recognizing only the material as real) is something that Celtic religious figures—and Celtic-influenced Jesuans/Christians—have criticized. [↩]

Especially given the truism that “remove the state and the regime of capital would not last a day.” Robert Heilbronner, The Nature and Logic of Capitalism. New York: W. W. Norton & Company, 1985, p. 105. [↩]

The Instinct of Workmanship and the State of the Industrial Arts. New York: The Macmillan Company, 1914, p. 204. [↩]

Andrew Bard Schmookler has argued that “over time, the market system shapes the values that govern the choices we make.” The Illusion of Choice: How the Market Economy Shapes Our Destiny. Albany, NY: State University of New York Press, 1993, p. 12. “Industrial and Pecuniary Employments,” The Place …, p. 279-323. First published in Publications of the American Economic Association, 1900. [↩]

Richard J. Herrnstein and Charles Murray, The Bell Curve: Intelligence and Class Structure in American Life. New York: The Free Press, 1994. [↩]

Needless to say, the realities associated with that tradition have been far removed from the ideals. [↩]

A “utopia” is usually thought of as an “ideally perfect place,” the term coming from Sir Thomas More’s [1478-1535] novel Utopia, published in 1515. Of course, “impractical” is also usually associated with “utopia”! [↩]

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